Rapidly rising energy costs and shrinking supplies are sparking creativity and generating new power sources

It's no news to anyone that energy prices have soared over the
past year. Oil is up, natural gas is way up, gasoline may reach
$2 a gallon this summer, and you may be paying a lot more for electricity
than you used to.

With conventional fuels so expensive, energy producers and users
are responding as people always do when prices rise: They look for
alternatives. And in this case, those alternatives run the gamut
from high-tech solar panels to your basic cow manure. People are
even consideringgaspconservation. In the Ninth District,
where hardscrabble necessity has always been the generous mother
of invention, there is a wide range of alternative energy initiatives.
Here is a sampling:

Biomass

Anything that is, could have been, or used to be a plant, but
is now being burned to produce energy can be considered a biomass
fuel. Trees, seeds and manure all qualify.

In St. Peter, Minn., Energy Performance Systems recently signed
a contract with Xcel Energy to build a 50-megawatt power plant
that will burn whole, fast-growing poplar trees.

Ravalli County in Montana is looking into a biomass electricity
generator that would use thickets of thin, nonmarketable trees
and small scrap left over from timber operations. A citizens group
in Missoula is exploring similar options on school trust lands.

A $52 million power plant fueled by 275,000 tons of waste wood
annually is planned for downtown St. Paul. The plant, touted as
the largest biomass-fired district-energy system in the country,
will provide both heat and electricity.

In April, the University of North Dakota, Grand Forks, tested
a biomass "co-firing" scheme, adding sunflower hulls
to the coal in a university steam boiler. A similar test planned
at the State Penitentiary in Bismarck will mix wood chip waste
with coal to produce both heat and electricity.

The Barnesville School District in Minnesota has saved about
20 percent on its heating bills by burning sugar beet seed screenings
and sunflower hulls in furnaces at two school buildings. The seeds
are a waste product from nearby American Crystal Sugar Co., and
the sunflower hulls are purchased as pellets from a Mapleton,
N.D., company.

The NEO unit of Minneapolis-based NRG Energy taps methane from
32 landfills nationwidetwo of them in the Twin Citiesenough
to power 100,000 homes, according to the company. There are currently
about 300 landfill gas utilization projects in the United States,
and the Environmental Protection Agency has identified another
600 potential sites.

Several energy projects use, or plan to use, cow and pig manure
to produce methane, heat and electricity (see "Cleaning
up"). Manure from about 400 cows or 4,400 pigs is needed
to power a 40-kilowatt generator.

A British firm is building a $100 million turkey manure and
alfalfa burning plant in Benson, Minn., that will generate 50
megawatts and begin operation in 2002.

American Energy Systems in Hutchinson, Minn., expects to sell
5,000 corn-burning home furnaces in 2001, up from 1,000 last year,
and is negotiating with manufacturers to build as many as 50,000
units. The company estimates that burning corn (at about $3 per
million BTU) is half as expensive as fuel oil and a seventh the
cost of electricity.

Wind power

Wind power has taken off in the Ninth District since the topic
was covered at length in the January 2001 fedgazette.

In April, Northern Alternative Energy dedicated the first utility-scale
wind turbine in the Twin Cities area, a 213-foot high turbine
in Elk River that will generate enough electricity for 120 homes.
Northern Alternative entered a contract with Xcel Energy this
year to provide about 130 megawatts of wind power to the utility.

Also in April, Xcel selected Chanarambie Power Partners to
develop another 80 megawatts of wind power in Pipestone and Murray
counties in Minnesota.

In South Dakota, Clipper Windpower announced plans in April
to build 133 turbines in Hutchinson, Turner and Yankton counties,
to be placed in a 22-mile line and capable of producing 200 megawatts.
Up to 2,000 wind turbines that would produce 3,000 megawatts are
envisionedmostly in Jerauld, Hand and Hyde counties.

By the end of 2002, California developers hope to build as
many as 50 windmills just north of Velva, N.D., one of the state's
windiest locations. And the state's Minnkota utility is currently
erecting a 300-foot turbine near Oriska.

West Fargo's DMI, formerly a sugar beet machinery manufacturer,
built 14 wind turbine towers in 1999, expects to ship 150 in 2001
and guesses it will build about 300 in 2002.

To address a lack of transmission capacity, a $4.5 million
initiative announced by Minnesota's McKnight Foundation will look
at issues surrounding the building of power lines and explore
the capacity of wind power to generate rural jobs.

Montana has relatively little wind power, but a new law encourages
more by extending the state's current wind energy tax credit from
seven to 15 years for wind farms based on Indian reservations.
The Fort Peck tribe recently completed a feasibility study for
a 200-megawatt wind farm in northeastern Montana, and the Blackfeet
Indian Reservation is planning to provide 22.8 megawatts to the
grid by late in 2002.

Geothermal

Geothermal technology uses pumps and closed-loop pipes buried in
the ground to extract heat from the earth in the winter and return
it in the summer, providing year-round low-cost heating and cooling.

Geothermal heating is gaining attention in North Dakota, according
to the Capital Electric Cooperative in Bismarck, which has installed
about 100 residential systems in the area as well as several business
units.

In Minnesota, sophisticated heat pump systems have been installed
in the elementary school in Onamia, as well as in homes near Princeton.

The Phillips Eco-Enterprise Center in Minneapolis heats and
cools its 24,000-square-foot facility with a computer-controlled
geothermal system, which helps cut monthly energy bills from $2,500
to $1,000.

Not easy being green

None of these technologies is revolutionarysome are quite
ancient. But they're all getting serious consideration, and many
have attracted significant funding. District state and local policymakers
have encouraged development of many of these alternative energies
with a mix of mandates, subsidies and simple jawboning.

But the same strong market signals that have brought renewed attention
to alternative energies are also calling new resources into development
of conventional energy sources. Power companies have announced 90,000
megawatts of additional electricity generating capacity in the next
18 months. Natural gas companies increased pipeline additions by
115 percent this year and are planning a multibillion-dollar pipeline
from Alaska. Oil companies are feverishly adding new rigs and enhancing
refining capacity, and coal mines are desperately seeking miners.

Wholly independent of presidential policies to address the "energy
crisis," the industry is evidently reacting to climbing energy prices
by building greater capacity. The industry read the opposite signals
in the late 1980s and early 1990s, when low oil and natural gas
prices led to little exploration, few pipelines and modest refining
capacity. Then demand expanded far beyond projections, as the economy
grew faster than anyone expected.

The Department of Energy projects that American consumption of
energy from renewable sources will increase 26 percent by 2020,
but the renewable share of the total energy consumption pie will
actually decline slightly, from 6.9 percent to 6.5 percent, as natural
gas and petroleum become still bigger sources of power.

In responding to the current energy shortage, policymakers may
wish to ponder which of the alternative energy initiatives will
remain economically attractive once new sources of conventional
energies come on line and prices descend from their peaks. Then
again, they might well decide that a diversity of energy sources
provides a measure of stability and flexibility that's worth a few
extra bucks.